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German Banks Cutting Further Their Ship Finance Exposure

Business & Finance

November 30, 2017

The recent recovery of the container shipping and dry bulk market has not dissuaded German banks from reducing their exposure to shipping loans which pushed the country’s banking sector into the red.

As NORD/LB Norddeutsche Landesbank reports its return to profit for the first nine months of this year, the German lender said it would reduce its ship finance portfolio to EUR 10 billion, and at a pace faster than expected.

In the ship financing segment, which will be managed exclusively at the Hanover location in the future, NORD/LB scaled back its portfolio to EUR 13.3 billion and it expects the amount to fall below this mark by the end of the year.

The bank is also working on improving the portfolio’s quality by staying clear of low-risk new business.

“In the medium term, the portfolio is expected to amount to around EUR 10 billion, whereby the proportion of problematic financings (NPL) is to be considerably reduced,” the bank said.

NORD/LB has set itself the goal of reducing the NPL portfolio in ship financing from today’s EUR 9.1 billion to EUR 5 billion by the end of 2019.

German lender HSH Nordbank, which is preparing for its privatization, set to close in February next year, said it has also concluded new business deals in its shipping segment on a restrictive basis.

This means that the bank inked deals on financing exclusively with international shipping companies that have a good credit rating. The shipping segment was on budget with a figure of EUR 0.4 (0.2) billion.

In the group’s shipping portfolio, the NPE was reduced to EUR 5.8 billion from last year’s EUR 8.3 billion.